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Should Economists Make Moral Judgments?

At least since the days of John Maynard Keynes, professional economists have not had to worry too much about the moral implications of their technical work. But that is quickly changing with the global march of illiberalism, and economists now must ask themselves hard ethical questions before dispensing policy advice.

BUDAPEST – I recently attended a PhD seminar in labor economics at the Central European University in Budapest. In it, we considered whether the Hungarian government’s scheme to focus on long-term unemployment is working efficiently, and we raised a host of technical problems for the doctoral candidate to address.

But I came away disturbed by the experience, wondering whether professional economists (particularly in the West) need to reassess the moral and political context in which they conduct their work. Shouldn’t economists ask themselves whether it is morally justifiable to provide even strictly technical advice to self-dealing, corrupt, or undemocratic governments?

To be sure, reducing long-term unemployment would alleviate a social evil, and possibly ensure a more efficient use of public resources. Yet improved economic performance can shore up a bad government. This is precisely the dilemma confronting economists across a range of countries, from China, Russia, and Turkey to Hungary and Poland. And there is no reason to think that economists in the “democratic heartland” of Western Europe and North America won’t face a similar dilemma in the future.

Over time, economists have offered three different moral or political justifications for their technical work. The first, and simplest, justification simply assumes that the “powers that be” (the ultimate recipients of their work) are “benevolent despots” in the mold that John Maynard Keynes described (though Keynes did not consider the British bureaucrats of his time to be despots).

In the 1970s, this defense was challenged by economists at the other end of the Western political spectrum, who pointed out that bureaucrats were a supplier lobby like any other. As such, they will always have an interest in expanding their own individual and collective importance, regardless of whether it maximizes social benefits. This assumption led economists to become “intervention skeptics” who preferred market-based solutions for any problem where the need for regulation was not obvious.

Between these two positions, most economists have been content to ply their trade on the assumption that, however self-interested bureaucrats might be, they are subject to oversight from democratic politicians whose own self-interest is to get re-elected by keeping voters satisfied. So long as the economist’s technical solutions to policy problems are offered to officials with democratic legitimacy, according to this view, there is no cause for political or moral concern.

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In fact, even economists in communist dictatorships could proffer their best technical advice with a comparatively clean conscience, because they were convinced that introducing more market-mediated outcomes would inject efficiency into planned economies and increase the sphere of individual freedom. This was true even in the Soviet Union, at least after Nikita Khrushchev’s accession to power in the 1950s.

But now, for the first time in many decades, economists must consider the moral implications of giving good advice to bad people. They are no longer exempt from the moral quandaries that many other professionals must face – a classic example being the engineers who design missiles or other weapons systems.

The new moral dilemma facing economists is perhaps most stark within international financial institutions (IFIs) such as the International Monetary Fund, the World Bank, and the World Trade Organization, where economic mandarins with significant influence over public policy earn their living.

After the fall of Soviet-style communism, the IFIs admitted Russia and the other former Soviet republics (as well as China) on the assumption that they were each on a path to embracing democracy and a rules-based market economy. But now that democratic backsliding is widespread, economists need to ask if what is good for authoritarian states is also good for humanity. This question is particularly pertinent with respect to China and Russia, each of which is large enough to help shift the balance of world power against democracy.

That being the case, it stands to reason that democratic countries should try to limit the influence of authoritarian regimes within the IFIs – if not exclude them altogether in extreme cases. But it is worth distinguishing between two kinds of international institution in this context: rule-setting bodies that make it easier for countries with hostile ideological or national interests to co-exist; and organizations that create a strong community of interest, meaning that economic and political benefits for some members “spill over” and are felt more widely.

Among the IFIs, the WTO is an example of the first type, as is the United Nations among international political institutions. The European Union, on the other hand, is the preeminent example of a true community of interests. And the IMF, the World Bank, and many UN agencies lie somewhere in between.

From this categorization, we can derive guidelines for economists to follow when advising authoritarian regimes. Advice or scholarship that allows authoritarian governments to avoid conflict with other countries would be morally acceptable in most cases. After all, as Winston Churchill famously observed, “jaw-jaw” is better than “war-war”. A good example would be research into how best to share scarce freshwater among Middle Eastern countries.

On the other hand, economists need to take great care when providing advice or conducting research with clear policy implications for authoritarian governments. Economists should not be in the business of helping authoritarian regimes advance nefarious ends on the back of stronger economic growth or resources saved. That probably means not giving advice to Hungarian Prime Minister Viktor Orbán on how to reduce long-term unemployment.

Needless to say, every case will be unique, and economists will have to decide for themselves. As in the past, some may even embrace authoritarianism. But for the profession as a whole, the moral consequences of translating economic analysis into practice can no longer be ignored.

Stellar example of asking the wrong question ... In the applied social sciences, the distinction between "technical advice" and "moral judgement" is a fallacy. Any policy advice, whether it comes from an economist or a political scientist or an anthropologist, involves moral judgement (or a normative element, if you like), in terms of both the substance of the advice and the client it's been given too. Only bad social scientists will uphold the notion that there is such a thing as "neutral policy advice". I thought that this debate had been closed in 1962 by Thomas Kuhn, but apparently former finance minister Rostowski missed the memo.

This commentary is very interesting but might point to the broader context of the western civilization as a system of thought that doesn't see good and bad as subjective notions, but as objective ones. For example, it was very well understood since several decades that human beings will automatically and massively support liberal-democracy and a rules-based order (the good), as soon as a more or less precise level of material comfort is reached, except if it is reached because of natural resources of course. China is now an outlier (therefore bad) because of... fill the blank.

Our mechanistic understanding of people and populations, originating, say, in the rational project of the enlightenment, allowed massive progresses by eliminating the illusion of a spiritual dimension, that religions like christianism brought about. When the probably mythical figure, jesus christ, "said", material wealth is practically worthless as you have to give it up at death while spiritual wealth is the only worthy one as it is beyond life and death, he was entirely wrong we now know, as we understand that consciousness, according to our best scientists is entirely a bio-chemical process, subject to the laws of physics and therefore devoid of freedom other than through potential randomness.As a result we might wonder why the mechanisms that usher all populations into the western master model, if reaching a certain degree of comfort don't, in some cases, work as predicted.In other words, the bio-chemical mechanics of individuals and populations might be more different between the advanced populations and the less advanced populations, pointing to different evolutionary branches rather than to different levels of advancement on the same unique branch, and putting in doubt the notion of advanced population (analogically similat to the notion of superior race), or mature societies, just like a dolphin is arguably nor a superior nor an advanced octopus.

The ethical question posed here is about as shallow and over-generalized as economics itself. Think of it this way - capitalist democracy is a market, and phenomenon such as american-style regulatory capture and gerrymandering are features, not bugs, along with the ideological exploitation of the simple minded and engorging the greedy. All right up the conventional market economist's alley. If you harbor doubts, get a real job, if any exist outside the closing circle of corruption.

Very thought-provoking article, with some very good observations but also important omissions.On the large spectrum of the positive system – ‘does it work?’- to the normative system – ‘is it good for the people?’-we have a good number of examples of a mix of the two systems.Nikita Khrushchev genuinely believed that the Soviet Union would ultimately overpass the USA, and Mikhail Gorbachev genuinely believed that the system could be made more efficient without a real political change – read challenging the role and position of the communist party. We have seen the results, and the current evaluation of Russia is – politely – ‘not very efficient, not very democratic’. How many schools and hospitals could have been built with the millions Roman Abramovitch spent on his social recognition obsession by buying Chelsea? Whether you like – or hate – the French PSG team, the moral question was never seriously debated in France – is it OK to have an absolute monarchy using its petro (and gas) dollars to buy publicity by playing with – and abusing - people’s passion for football?

The ‘Chicago boys’ are credited with the remarkable success of the Chilean economy, under the rule of a ruthless dictator, who – as it is never too late to ruin a reputation – was caught with his fingers in the honey pot. Pinochet is gone, but the Chilean economy continues to be very performant.Raghuram Rajan, a highly reputed Indian economist and an international academic, former Chief Economist and Director of Research at the International Monetary Fund, and currently professor of finance at the University Of Chicago Booth School Of Business, did not last long as governor of the Reserve Bank of India. His attempts to reform the Indian economy could not resist the powerful lobby of the rich (barons of the economy) and famous (politicians). The current American president is surrounded by a large bandwagon of economic experts who seem to enjoy and approve his economic choices- largely distributed via his Tweeter account - , very often before his experts are informed about these well-thought, well-documented and well-debated decisions. It will not take long to see the consequences of his decisions on the American economy, and the role and position of the country in the world, but we can already see what that means for the rest of the world. Do his experts come from the University of Chicago? I doubt about it.How about professional, well-meaning bureaucrats serving democratically-elected leaders?Not many people ever heard about ENA (the French Ecole Nationale d’Administration) that is a prolific supplier of the ruling class of France – the current and the precedent presidents being only two of the most famous, if not contested examples of that category of a corporatist clique. Are they competent? As reality is a rebellious beast, the state of the French economy would not warrant that claim – the famous slogans: ’ corporatist clique. Are they competent? As reality is a rebellious beast, the state of the French economy would not warrant that claim – the famous slogans: ’l’etat stratege et l’etat actionaire’ have profoundly undermined the performance of the French economy, despite remarkable resources – natural, as well as human-based creativity and innovation.SNCF, the French government railway company has a CEO appointed by the government (and, as expected, an ENA graduate) and a board of directors - for the holding group – of 28 persons, with 20 members appointed by government and government-controlled organizations and 8 members appointed by the labor unions. Additionally two other boards of directors for the two subsidiaries of the group have a total 48 members.The company is chronically losing money, not to mention poor performance in terms of traffic and service, and carrying a debt of some €55 billon that, remarkably, do not appear in the accounts of the company or of the government, who is very reluctant to take responsibility for its decisions, the obvious source of the performance of the company – financial, quality of service, 30-years old equipment, but comfortable employment conditions for its labor force, guaranteed among other privileges, employment for life. For comparison the French oil company Total – 171 US$ billions in sales in 2017 – has a board made of 12 persons.Do we have a clear answer to the questions raised by Mr. Grotowski? Unfortunately not.In the current context of all major powers in the world, the US, China and Russia led by individuals that get very angry at any attempt to discuss transparency, accountability and moral values, we are in dangerous territory, with this academic discussion, extremely important for the real word, having few chances to get a clear, definitive and honest answer.

I think this is wrong. A stronger economy benefits all people in a country, not just politicians. Making a country poorer just to punish a bad government leads to places like North Korea where the people starve and the government remains unchanged.

Economists are a very confused bunch at the best of times. And the most religious fanatics on the planet. They hang on to a concept even when its proven to harm the population… Free trade for an example. So why have them try to be subjective about politics… they have enough trouble understanding how to undertake economics without bias.

I am confused. If economists can give good advice and really result in massive growth that uplifts most, if not all people in a given country, then does it really matter if said country is run by an authoritarian or a democratic government?

If democracy can only thrive by denying prosperity to authoritarian states, then one must really question what is so good about "democracy".

Right on! I couldn't believe my eyes reading that you shouldn't provide good advice to an "evil" government. Maybe he should have clarified "evil" for whom? For the interests of some elites? The establishment is always ready to cry murder when there is somebody that does not favour their agenda (presently, Hungary, Poland), but they shut up to equally vicious governments that are not a threat to their interests. Do you want me to give some examples?: Egypt, Philipines, Pinochet (in the past), the Saudis, etc., etc.

'Economists should not be in the business of helping authoritarian regimes advance nefarious ends on the back of stronger economic growth or resources saved. '

China manages to both have the strongest economy on earth and the most moral. 90% of Chinese say that their economy and their government work for the good of everyone–not just a fortunate few. http://www.wvsevsdb.com/wvs/WVSData.jsp?Idioma=I+(http://www.wvsevsdb.com/wvs/WVSData.jsp?Idioma=I)